Beware the fees jungle

When it comes to choosing personal finance products, it can often pay in the long-run to compare the different aspects of loans, credit cards and mortgages to get the right deal for you.

It is also becoming increasingly important to check out the potential penalties, late fees and early termination charges attached to a product as they can sometimes provide a nasty sting in the tail.

The Sydney Morning Herald says consumer groups have become increasingly concerned over charges for deferred establishment or early termination on home loans, as well as "exception fees" on credit cards - such as charges for going over a card limit or withdrawing cash via an ATM.

Oddly enough, the newspaper adds, there are also "late" fees for paying off a credit card too early.

However, faced with government demands for more transparency, some lenders have "restructured" their fees so they fall outside comparison data, meaning consumers could be blindsided at a later date if they do not do their homework.

Research by InfoChoice found that between 2004 and 2007, establishment fees for a standard, variable rate home loan fell by 16.8 per cent. However, over the same period, the annual service fee on the same type of loan increased by 390 per cent.

Credit card fees have also been on the rise recently. Last year, the newspaper says, charges for late repayments, limit breaches and converting foreign currencies rose by 16 per cent.

Over the past five years, according to the Reserve Bank, income from credit card fees has increased by 170 per cent.

Choice, which is part of the Australian Consumers' Association, says these and many other fees are not only unfair - they bear "no relation" to the cost they are purported to cover.

In order to avoid getting hit by fees, the newspaper says, consumers should ensure they always compare deals and investigate the overall cost of a product, not just its upfront charges.

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